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What Would a CFPB Commission Have Done Differently?

posted by Adam Levitin

Here’s the question CFPB commission proponents need to be able to answer convincingly:  what would the CFPB have done differently over the past five and a half years if it had been a commission, rather than a single director?  What supposed overreach would not have occurred?  

So, CFPB commission proponents, here's your chance. Comments are open.


Let's turn the question around. Why did Dodd-Frank use the relatively unusual single-director structure rather than the more common commission structure?

1. Less likely to violate basic norms of due process such as statutes of limitations and retroactive application of rule changes because of the controversy minority commissioners could cause. This would mean less litigation risk to Bureau.

2. Less likely to spend resources aggressively pursuing areas outside the Bureau's purview (school accreditors/auto dealers), instead focusing on the ample work to be done in the Bureau's core areas of responsibility.

3. Rules would be less extreme and therefore less controversial.

4. Bipartisan nature of the commission would make agency itself less controversial, cutting down on legislative strum and drang.

5. A commission could include other skill sets that could improve agency performance (economists, technologists, etc.)


1. You're putting the cart before the horse on this point, which only seems to be about the still pending PHH case. In that instance, there's a discrepancy between due process "norms" and what the statutory language provides. We've been hearing for years from conservative jurists that if the statutory language is clear go no farther. So why look at some ill-defined norms when there's clear statutory language? My point here isn't to take a position on the PHH issue, but to emphasize that reasonable minds could very easily disagree. In any case, even if you're right, though, it's just one case.

2. There are two incorrect assumptions in your point. The first is that the CFPB has spent a lot of resources pursuing school accreditors and auto dealers. As far as I can tell this is a very small percentage of what the CFPB has done on enforcement, and enforcement is itself only a fraction what the CFPB does. Second, you assume that the CFPB doesn't have jurisdiction over school accreditors or auto dealers. School accreditors can be "service providers" or can provide "substantial assistance" for UDAAP violations. It all depends on the facts, but I don't think one can say as an absolute matter that there is never any jurisdiction, and that's not what the Judge Leon opinion on the CID said. As far as auto dealers, 12 USC 5519 makes clear that auto dealers are themselves only outside of the CFPB's jurisdiction to the extent that they are making loans that are routinely assigned to third parties. The CFPB has always very clearly had jurisdiction over indirect auto lenders, and it should hardly be a surprise to anyone that the exercise of that jurisdiction over indirect auto lenders might have some downstream effects on auto dealers themselves. (See my 2009 Hydraulic Regulation piece that makes a parallel argument in housing finance, for example.) And are you really being serious that you want to see the CFPB doing more enforcement work in other areas? That is, is your beef really about resource misallocation or is it about allocation of any resources to a particular area?

3. Give some specifics. What in any finalized rule is "extreme"? I haven't seen any CFPB critic who can actually point to any specifics beyond the statistical methodology used in the indirect auto lending guidance. (And if that's the problem, it hardly fits with point 5 below, regarding having economists on the commission, as who do you think came up with that methodology?)

4. Perhaps, but I think any decline in controversy would be because of ineffectiveness.

5. The CFPB already employs a host of economists and technologists. If you're suggesting putting them on the commission itself, well, I can think of more relevant backgrounds, such as professional experience offering consumer financial products, consumer financial advocacy, or consumer finance scholars more generally (I hardly think economists have a lock on knowledge).


1. It is one case that we know of that has been litigated to the appellate level, and I may have a lower tolerance for retroactive application of rules than you, but you asked me.

2. We will see how the court comes down on jurisdiction, though again, I am more skeptical than you. Either way, given the amount of legitimate work that can be done in unambiguous areas any resources spent on land grabs are suspect. It is possible a commission would make the same land grab - but it would be less likely or at least better limited.

3. I am not a fan of the prepaid card rule's treatment of peer-to-peer payment systems and overdraft. We will also need to wait and see what arbitration and small dollar rules look like, and how much they change from they were as proposed. It is possible the final rules will be more moderate than the proposals, how much of that (if it happens) would be staff taking comments seriously versus the fear of Congress is unclear.

4. Regulation that swings back and forth as new directors take over is less effective than compromise regulation that is durable. Whenever Cordray leaves and Trump puts his person in the CFPB is likely to shift markedly. That uncertainty is bad. Further, even if a solo director could do more good when you had a "good" director you don't have the check on a "bad" director that you get with a commission. (Besides, I hardly think the problem with American politics is too much compromise.)

5. If you want to put consumer advocates or industry pros on the commission I think that is great and would fully support it, a commission lets you do that in a way a solo director doesn't. As for the economist, I would think having an economist on the commission could lead to better performance by the staff economists because there would be someone who could assess their work.

Now to follow up with Ebenezer's question - what does a sole director give you that a commission doesn't?

It isn't necessarily more efficient. The CFTC was assigned more rules under Dodd-Frank than the CFPB and they completed them. The SEC has done more final/interim final rules in 2016 than the CFPB. Of course, the quality of regulation isn't something measured by volume anyway. A good director might give you better rulemaking and enforcement than a commission (for varying definitions of good) but then a bad director is likely to be worse than a commission. The risk of capture by special interest is likely more acute with a solo director, as is agency polarization. All in all the value prop doesn't seem to be there long term. Would love your thoughts.


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